Work in progress is money you have spent and not yet asked for

The balance nobody looks at

A small business watches two numbers: what is in the account, and what has been invoiced and not yet paid. Between them sits a third, which is everything that has been done and not yet billed at all — hours worked, materials bought, jobs half finished, work completed last week that has not made it onto an invoice.

That third number is real money. It has already left your account or been paid for with your time, and it is the amount you would lose if the client vanished tomorrow. It is also the number most likely to be unknown, because nothing in an ordinary week forces anybody to add it up.

It accumulates in ordinary, unremarkable ways

Long jobs are the obvious source: three weeks of work, one invoice at the end, and for those three weeks the whole cost sits with you. Monthly billing does the same thing on a smaller scale, since work done on the second of the month waits four weeks before it’s even requested.

The quieter sources are worse. A stage that was completed but never triggered because nobody thought to raise the invoice. A job finished in a busy week where the paperwork slipped. Extra work agreed verbally and never added to anything. Each is small. Together they are frequently larger than the outstanding invoices everybody is watching.

Two costs, and the second one is the serious one

The first cost is financing. Money spent and not yet claimed is money unavailable for anything else, and a business with a healthy year and no cash is usually one carrying a great deal of unbilled work.

The second is exposure. Unbilled work is the part of your relationship with a client that has no paper attached. There is no invoice, no due date, and often no formal record that it was ever agreed. If the relationship breaks down at that point — a dispute, a cancellation, a client who simply stops — you are arguing about work whose existence is not documented, which is a considerably weaker position than chasing an overdue invoice.

Why it is worse than a late payment

A late invoice is unpleasant and it’s at least a claim. It has a number, a date and an agreement behind it. Everybody knows what is owed, and the process for pursuing it is understood.

Unbilled work has none of that. It is a claim you have not yet made, quantified only in your own notes, and the longer it goes unbilled the harder it becomes to raise without the client asking why they are hearing about it now. Time does not improve it in any respect.

Measure it once a week

The whole practice is one number, written down weekly: how much work has been done that has not yet been invoiced. Rough is fine. Precision matters far less than the habit, because the value is in noticing when it climbs rather than in the figure itself.

Most people are startled the first time. A business turning over a modest amount can easily be carrying several weeks of unbilled work without anybody having decided that it should, and seeing the number is generally enough to change behaviour without any further intervention.

It is worth splitting the figure by client as well, at least occasionally. A total that looks tolerable across six customers can be almost entirely attributable to one of them, and that concentration is the version that actually threatens the business rather than the aggregate.

Shorten the distance between doing and asking

The remedies are unglamorous. Invoice on completion of a piece of work rather than waiting for a convenient date. Raise the invoice the same day the work finishes, since a day of momentum is worth a fortnight of intention. Record extra work as it’s agreed rather than reconstructing it later, when the client has forgotten and you are guessing.

For longer engagements, bill in smaller units even where the total is unchanged, because the exposure at any given moment is what matters rather than the size of the job. And where the work involves buying things for the client, ask for that money before spending it rather than afterwards. None of this changes what you earn. It changes how much of your own money is out on loan at any moment, which is what actually determines whether a busy year is survivable.